Why of Rising Interest Rates and When Renting can trump Buying

Why Are Mortgage Interest Rates Increasing?

According to Freddie Mac’s latest Primary Mortgage Market Survey, the 30-year fixed rate mortgage interest rate jumped up to 3.94% last week. Interest rates had been hovering around 3.5% since June, and many are wondering why there has been such a significant increase so quickly.

Why did rates go up?

Whenever there is a presidential election, there is uncertainty in the markets as to who will win. One way that this is noticeable is through the actions of investors. As we get closer to the first Tuesday of November, many investors pull their funds from the more volatile and less predictive stock market and instead, choose to invest in Treasury Bonds.
When this happens, the interest rate on Treasury Bonds does not have to be as high to entice investors to buy them, so interest rates go down.  Once the elections are over and a President has been elected, investors return to the stock market and other investments, leaving the Treasury to raise rates to make bonds more attractive again.
Simply put, the better the economy, the higher interest rates will go. For a more detailed explanation of the many factors that contribute to whether interest rates go up or down, you can follow this link to Investopedia.

The Good News

Even though rates are closer to 4% than they have been in nearly 6 months, they are still slightly below where we started 2016, at 3.97%.
The great news is that even at 4%, rates are still significantly lower than they have been over the last 4 decades, as you can see in the chart below.

Any increase in interest rate will impact your monthly housing costs when you secure a mortgage to buy your home. A recent Wall Street Journal article points out that, “While still only roughly half the average over the past 45 years, according to Freddie Mac, the quick rise has lenders worried that home loans could become more expensive far sooner than anticipated.”
Tom Simons, a Senior Economist at Jefferies LLC, touched on another possible outcome for higher rates:

“First-time buyers look at the monthly total, at what they can afford, so if the mortgage is eaten up by a higher interest expense then there’s less left over for price, for the principal. Buyers will be shopping in a lower price bracket; thus demand could shift a bit.”

Bottom Line

Interest rates are impacted by many factors, and even though they have increased recently, rates would have to reach 9.1% for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.

This is a good time to buy a home.  Want help connecting with an Accredited Buyer's Representative near you?  Give me a call (Lori Koschnick 920-901-4373).  It's a pleasure to help!  

Buying a Home, Summer 2015

Buying a Home Summer 2015 by Lori Koschnick

Go Home . . . and Bring Home that Dog!

#HomeRocks.  Home Rocks with even more gusto when you adopt a pet and bring home a dog.  My dog is part of the family and my greatest fan -- his big face is in the window watching me pull away from the garage when I leave home and it's there again to cheer on my homecoming at the end of the day.

"Belly-Boy" (short for Bellamie, which I'm told is French for "beautiful friend") is my buddy, gives great hugs, and is the cover-dog for this video pictured above .  The breed comes from the Pyrenees Mountain range along the border of France and Spain. Belly-Boy pops up again at the tail end of the 30 second video with my son.  The photos were taken just moments after we adopted this Great Pyrenees puppy. 

You'll see our first Great Pyrenees love, "Champ" (short for "Sir Woolly Britches" -- my husband refused to call out "Sir Woolly Britches!" in public) at the end too.  He keeps watch over the new pup with his boy, "Luke."

Finding and procuring a home of your own, just like finding the perfect pet, is a process that requires a bit of waiting.  Often it involves plans to fulfill dreams of bringing home a 4-legged furry pet.  When you find a house that's "home" for you and you get the keys in your hand . . . finally, you can bring home the dog or cat you've always wanted.  They're waiting to go home too! 

Aa a friend of Adopt-a-Pet and home buyers, I'd like to help you find a home to call your own and a forever home for a dog or cat waiting to be adopted.  Coldwell Banker Real Estate is on a mission to help find forever homes for 20,000 dogs! 

Direct questions to Realtor, Lori Koschnick, independent agent for Coldwell Banker The Real Estate Group Inc.  Coldwell Banker offices are independently owned and operated.

Infor@LoriKoschnick.REALTOR  or  Lori@HomewardBoundPro

Where are Mortgage Interest Rates Heading?

Where are interest rates heading?

    http://goo.gl/zVmMTP

to Dream Fearlessly . . . The American Dream Lives

To dream fearlessly . . . to pursue our dreams with determination and courage . . . to believe we will successfully transform our dreams into our reality . . . to pick ourselves up when we fall, continuing the pursuit of our dreams . . . to overcome obstacles with creativity, sweat, faith . . . and persevere until we are living the dream (which inspires us to new dreams/goals) . . . is the heartbeat of America.


Home - Family - Career - Health - Joy - Love - Friendship - Education . . . The American Dream lives.  Pursuing my dreams while helping others pursue and achieve their dreams is my career as an independent real estate agent for Coldwell Banker The Real Estate Group Inc., an affiliate of Coldwell Banker Real Estate LLC.  More than profession, being a Realtor is an amazing experience.

To those who have given me the honor of helping them pursue their dreams during these seven years, Thank You!  You who are ready to pursue your dream of home -- be it the dream of your first home or vacation home or larger home or smaller home; be it a dream of extravagant luxury, the extravagance of "downsizing" and simplicity, and anywhere in between -- you can call on me to be your advocate and help you achieve your dream.

American Family Insurance, like Coldwell Banker, inspires us to Dream Fearlessly.   Enjoy the music video.  Be inspired.  Dream.


                          

NE Wisconsin BLACK FRIDAY Real Estate Sale is ON!

First Time Home-Buyer Secrets

1st Time Home-Buyer Secrets

 “Spoiled,” “unrealistic,” and “demanding” proceed “first time home-buyer” in the daily banter of many Realtors.  You’ll find them commiserating around water-coolers and coffee-stations from coast to coast, mourning the good old days of real estate before the internet and HGTV.  I say today's first time home-buyers are Sacrificial.  Wait . . .   What?

 

No generation is immune from sacrifice.  Like their parents and grandparents, the vast majority of millennials want the American Dream of steady employment, a loving family, a Home of their own  -- and they routinely make sacrifices to achieve their goals.  

It appears every generation receives access to something new that’s designed to make lives “easier” and as each new advance emerges so do greater expectations of what we can accomplish, what we should know, and how long it should take us to reach our goals.  Perhaps these generational changes make it difficult for older generations to truly see and understand the very real sacrifices today’s first time home-buyers make in pursuit of their dreams. 

 

Contrary to what popular myths, today's millennial generation isn't waiting for easy-fixes and get-rich-quick schemes.  Like other generations, they work hard for what they have.  An overwhelming majority use financing to buy their homes.  The majority of their down-payments come from good old-fashioned saving.

As professionals, it is our duty to understand our home buyer clients so we can help them in their pursuits.

The tools and information available to Realtors in 2014, when shared with first time home-buyers and utilized to help them reach their real estate goals, produces transactions with less stress and provides home-buyers the opportunity to have a great home on great terms.   Anticipating a first time or repeat home-buyer of any age to expect less of me as a Realtor is “unrealistic” and I'd be a “spoiled . . . demanding” Realtor expecting today’s home buyers to be satisfied with the norms of the past. 

  

Lenders, Start Your Engines: NASCAR Mortgage Sponsorships Return

Things can't be too bad in the mortgage industry when companies are getting back into NASCAR sponsorships, right?

LendingTree announced Thursday it would sponsor the rookie driver Parker Kligerman in Sunday's Daytona 500. LendingTree joins Quicken Loans among the first mortgage brands to re-emerge as NASCAR sponsors after the housing crisis.

Given the number of now-defunct former racing sponsors from the mortgage industry – FirstPlus, Argent and Ameriquest come to mind – it may be surprising to see companies re-enter the sport. But the reasons that drove those subprime lenders' sponsorship strategies are still relevant in today's industry.

"NASCAR's fans are fiercely loyal. They understand that sponsorships make their sport possible and they embrace those companies in the sport," says Aaron Emerson, a spokesman for Quicken Loans.

LendingTree's last-minute, one-race deal came a day after Kligerman was involved in a wreck during practice that sent his car airborne, ripped a hole in the track's perimeter fence before landing on its roof — forcing his small upstart team, Swan Racing, to resort to a backup car for Sunday's race, which kicks off the 2014 Sprint Cup Series season. The LendingTree "spokespuppet," Lenny, donned the hood of the backup car, No. 30, which started in 41^st place.

"This is a short-term deal and we are looking to see what sort of performance and reaction we get to it," says Fred Saunders, LendingTree's senior vice president of marketing. "Part-in-parcel with that is also determining how we can leverage this sort of promotion as a bona fide business driver and to build awareness and business at the same time."

No longer a lender after selling its mortgage origination business to Discover Financial Services in June 2012, LendingTree has refocused on its core business of lead aggregation. The company is headquartered in Charlotte, N.C., where the teams that compete in NASCAR also operate. The Daytona 500 sponsorship is LendingTree's first professional sports marketing effort.

"'When banks compete, you win' has been our tagline forever, and we've come back into the marketplace with a refreshed platform to help support our mortgage, auto and home services verticals," Saunders says. "We wanted a platform that was broad enough to support the new expanding profile of LendingTree."

Mortgage brands were a common sight on the hoods of racecars during the housing boom. FirstPlus Financial appears to be the first, sponsoring Jeff Ward and Eddie Cheever in the 1997 Indianapolis 500. A year later, FirstPlus moved from the open-wheel Indy Racing League to stock cars, sponsoring a NASCAR team co-owned by the NFL's Dan Marino and driver Bill Elliott.

But the sponsorship — which featured the FirstPlus name on the turquoise and orange No. 13 car resembling Marino's Miami Dolphins uniform — was short-lived. The race team struggled on the track, with rookie driver Jerry Nadeau getting replaced midseason after failing to qualify for 4 of 18 races. Meanwhile, FirstPlus had its own struggles off the track. The lender, which specialized in high loan-to-value home equity and subprime lending, suffered staggering losses, and later filed for bankruptcy protection and was sued by the race team in 1999.

GMAC's subprime consumer-direct brand may best be remembered for its "Lost another loan to Ditech!" ads. But Ditech also sponsored Hendrick Motorsports drivers from 2003 to 2005. GMAC's relationship with the Hendrick organization (whose current drivers include Dale Earnhardt Jr. and six-time and reigning Sprint Cup champion Jimmie Johnson) dates back to 1993, and its brand replaced Ditech's from 2006 to 2007.

This was of course, during the throes of the financial crisis. GMAC was spun off from General Motors in 2006 and later received a $17.2 billion bailout from the Troubled Asset Relief Fund in 2008. The Treasury Department announced plans last month to reduce its ownership stake in the finance company, now known as Ally Financial, to 37%.

The Ditech brand lives on, after being acquired by Walter Investment's Green Tree Originations business. Selling the name was part of Ally's efforts to reorganize its mortgage business into an entity called Residential Capital, which was put into bankruptcy.

For a time, it seemed like a mortgage tradeshow exhibit hall just wasn't complete without at least one racecar on display. Before Danica Patrick was GoDaddy's spokeswoman, she was Argent's, and a regular fixture representing the subprime wholesale lender at events like the annual National Association of Mortgage Brokers convention.

Subprime lending's obsession with motorsports marketing seemed to know no limits, driven largely by Argent and sister brand Ameriquest, the retail lending division of parent company ACC Capital Holdings. While Argent was sponsoring Patrick in open-wheel racing development leagues, its logo was also emblazoned on the winning car of the 2004 Indianapolis 500, driven by her teammate Buddy Rice. Argent continued its relationship with Patrick when she moved up to the Indy Racing League, where her fourth-place finish in the 2005 Indianapolis 500 landed her (and Argent's logo) on the cover of Sports Illustrated and remains the best-ever finish by a female driver.

Argent made Patrick the face of its campaign to move up into Alt-A originations, with ads featuring the driver frequently appeared in National Mortgage News, its sister publications and other media.

Meanwhile, Ameriquest was staying busy in NASCAR. It arranged a unique promotional package with Roush Racing to sponsor four drivers in what was then called the Busch (now Nationwide) Series, the NASCAR equivalent of baseball's triple-A minor league.

While a typical sponsor will have its logo on a single car, the four Roush drivers split up the driving duties on two Ameriquest-sponsored cars throughout the 2006 season. In two events that year, all four drivers took to the track. Dubbed the "Ameriquest Dream Team," the drivers combined to win five races in 2006, including a race in California where Carl Edwards started from the pole and finished third, and teammate Greg Biffle started third and won the race — with the Ameriquest logo on both cars' hoods.

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CREDIT SUISSE: There's A Buyer Rush In The US Housing Market Unlike Anything We've Ever Seen

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Credit Suisse analysts conduct a monthly survey of real estate agents in 40 housing markets across the U.S. to get a ground-level view of the market around the country.

The results from their latest survey are out, and Credit Suisse analyst Daniel Oppenheim writes in a note to clients that "the breadth of strength in both pricing and traffic at the start of spring selling season" is "unprecedented in [the] survey's history (dating back to '05)."

Oppenheim says real estate agents are "widely citing increased buyer urgency due to the combination of persistent inventory shortages (driving prices higher) and signs of mortgage rates moving higher."

The data showed that prices rose in all 40 markets last month – the first time that's ever happened in the history of the survey. Credit Suisse's home price index, derived from the survey data, increased to 79.3 from 74.6 in January.

The strongest price increases were observed in California, Florida, Austin, Las Vegas, San Antonio, Seattle, Denver, and Phoenix, according to Oppenheim.

The buyer traffic index derived from survey data rose to 65.1 from 59.0. Oppenheim notes that "only Charleston, Orlando, and Tucson failed to meet agents' expectations, while notable improvement was seen in the formerly-lagging Chicago and New York markets along Texas markets (Austin, Dallas, and Houston each increased by at least 14 points)."

Meanwhile, housing supply continues to fall and the length of time it takes to sell a home fell to a new low. Oppenheim says both of these factors point to further price gains this spring.

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Rate on 30-Year Mortgage Drops to Record Low

Housing sales have been picking up, and the lowest mortgage rates in decades are a key reason why. The average rate on a 30-year mortgage stands at 3.51 percent. That's close to the record of 3.31 percent set last November. "It's the rising prices that is the game changer," Patrick Newport, an economist at IHS Global Insight in Lexington, Mass., told Bloomberg News. "Housing is going to be the key driver that will get economy on a higher growth path," he said. The ultra-low rates have also encouraged many people to refinance. That often leads to lower monthly payments and more spending money.

How are Current Mortgage Rates Determined?

Locking in low mortgage rates is more than the luck of the draw. There are many components that contribute to how mortgage lenders gauge the rate range they offer to borrowers.
Here are three major influencers of mortgage rates today.

#1. Supply and Demand

Like any business, the issue of supply and demand must be assessed in order to determine what to charge customers for a service. In the case of mortgages, the mortgage crisis of 2008 sent demand for mortgage loans plummeting as supply shot through the roof. The ample number of mortgage lending options in the market and a disinterest in home financing resulted in current mortgage rates dropping to historic lows.

#2. Fed’s Regulation D

The banking operates in a single, large loop when it comes to the way interest rates are determined. The Federal Reserve sets certain requirements for all financial institutions with regard to how much money they must have on deposit.

Banks who do not have enough funds to meet the Fed’s Regulation D requirement, can choose to borrow the cash from other financial institutions or the Federal Reserve itself. However, as with all loans, this borrowing comes at a cost. The borrowing institution must pay interest on the loan while still generating a profit, so consumer mortgage rates are increased as a result.

#3. Likelihood of Default

In addition to the aforementioned factors that drive mortgage rates today up or down, borrowers’ credit histories play a significant role in the rate range they can expect to receive upon submitting a mortgage application.

Even if current mortgage rates are at an all-time low, borrowers who have a less than stellar credit history, and especially those without a substantial amount of equity or down payment to allot to the loan, will likely qualify for higher mortgage rates.

When lenders review a borrower’s creditworthiness, they are essentially making a judgement call as to whether the applicant is a high-risk for default. Lending money to an individual with a track record for making late payments or who doesn’t have any credit history to speak of leaves mortgage lenders with an immense level of uncertainty as to whether they’ll even get their money back.
As a result, mortgage providers will often increase mortgage rates to expedite the return of their money, to reduce their chances of loss in the long-term.

Despite these factors, borrowers who have diligently worked toward maintain a strong credit history can still accomplish their dream of owning a home by taking advantage of mortgage rates today, while they’re still incredibly affordable.


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Five Frequently Asked Questions on Mortgage Rates

Mortgage borrowers ask lenders a lot of questions, and the first usually is: What's your rate?
Whether they plan to purchase a home or refinance an existing mortgage, borrowers' chief concern is how they can get the lowest rate and save the most money.

By raising the rate question early, borrowers are also asking, though perhaps indirectly, whether a new loan is a good option for them, suggests Peter Thompson, a senior loan officer at Prospect Mortgage in Naperville, Ill.

"People want to make sure they're getting as good a deal as possible," Thompson says. "Even if they don't shop the rate, (they want to know) they're not getting taken advantage of, that they're getting the best deal. But they're also saying, 'What can you do? Is this something that's going to be possible?'"
Below are five of the most frequently asked questions about mortgages and mortgage rates that borrowers have for lenders.

What's Your Rate?

The question, "What's your rate?" is only natural, yet there is no one rate for all borrowers.
Rather, Thompson explains, lenders offer a range of rates, depending on myriad factors that include the property type, loan term, borrower's credit score, rate-lock duration, and whether the borrower will pay points or receive a rebate credited against the closing costs. (A point is an upfront fee equal to 1% of the loan amount.)

That variability means the lender needs more information from the borrower to quote a rate accurately, adds Greg Cook, a loan consultant at Golden Empire Mortgage Inc. in Temecula, Calif.
"Is this a purchase or refinance? A 30-year loan or 15-year loan? How much of a down payment are you going to make? Those are questions that we, as lenders, are trained to ask, but sometimes we don't get that chance," he says.

Can You Give a Lower Rate Than the Other Guy?

Many borrowers pose the rate question repeatedly, calling multiple lenders because they think that's a good way to shop for a mortgage. It isn't.
"They want to hear someone tell them a number that was lower than the last person. That's what they're looking for," Cook says.

Unfortunately, this quest for the one true lowest rate is mythical. All rates fluctuate from week to week, day to day or sometimes hour to hour.

Personalization and market risk make rate shopping difficult for borrowers, though many experts advise borrowers to shop for a loan, and the federal government requires lenders to use disclosure forms that encourage comparisons.

Jim Pomposelli, a mortgage banker at The Federal Savings Bank in Chicago, suggests that consumers should shop around -- up to a point.

"Don't run a Dutch auction where you are going back to everybody three times because at some point, you'll get what you pay for," he says.

Can I Get the Lowest Rate Among my Friends?

Another reason why some borrowers push so hard for the ultimate lowest rate is bragging rights. Cocktail-party talk and water-cooler chitchat are so important to them that reason flies out the window or at least takes a back seat to emotion.

"There is money to be saved, but when people really, really, really want to get that last bit off the table, I don't think it's fundamental economics," Pomposelli says. "It makes you feel good. It makes you feel smart. People want to feel they are smarter than the market."

May I Float Down the Rate?

Some lenders offer borrowers an option to "float down" a rate as an inducement to lock it -- in other words, to have a second chance to lock the rate if rates fall. Pomposelli says such programs are "quite expensive" for lenders, who have to make up the difference in another way.

"Banks aren't stupid," he says. "If you lock in at one rate and then you want to go lower, there is a charge in there somewhere."

Alternatively, borrowers can allow the rate to float to try to capture a downward tick, though that can be risky since rates can rise as well as drop, Pomposelli warns.

"You're thinking you might be able to save $20 (a month), but what if all of a sudden, you're paying $40 more?" he asks.

Can You Tell Me More About the Loan Terms?

Once the rate question has been raised and addressed, borrowers typically want more details about loan terms. Thompson says some frequently asked questions include: When can we close? Can you do this loan as a no-cost refinance? Is this a 30-year fixed-rate loan? Is there a prepayment penalty?
"A lot of the conversation is about making sure they know that it's the deal that it really is," he says.


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7 Real Estate Risks: Are They Over- or Under-Estimated?

We tend to speak of the risks of various courses of action in black and white, as risky or not. But the truth is, everything in life has risks - even doing nothing! Behavioral experts, economists and my dear old Dad agree: we’re most likely to make decisions we later regret when we under- or overestimate the risks of the outcomes we hope to avoid. So, outside of extremely high-risk endeavors like base jumping and going on blind dates, the real challenge in life is not to avoid risk entirely, but to assess it accurately and manage it accordingly.

This need to assess and act on risks appropriately, neither overblowing them or blowing them off entirely, is particularly critical when it comes to real estate risks. It’s easy to let your personality determine how you view and manage real estate risks. But that’s a costly approach: if you let your personal tendency to be risk averse stop you from ever owning a home, you will also miss out on the personal and financial advantages of home ownership, and the opposite is true. If you take a devil-may-care attitude toward your real estate and mortgage matters, you’re highly likely to make some highly regrettable decisions along the way.

So, instead of going on risk assessment autopilot, let’s take a quick, yet deep, dive into seven of the real estate-related risks that come up the most often in the minds of smart buyers, sellers and owners like you and how you can manage each of these risks wisely.

Risk #1: The Risk of Foreclosure. The risk of losing a home has only recently moved to the front of our collective national consciousness. Foreclosure was once a very, very rare event, seen as an unlikely worst-case scenario. But it became a vivid nightmare come true for an all-time high number of home owners during the recession. The risk and fear of foreclosure is largely due to this increase in foreclosure rate over the past few years, and to the vivid, catastrophic nature of the event. Also, almost everyone knows someone who either lost a home or had serious mortgage distress, so it seems like a very common occurrence.

When we take a look at the facts behind this risk, we realize that the risk of foreclosure appears to be much higher than it truly is. There are roughly 76 million owner-occupied homes in the U.S., according to the Census Bureau. Earlier this year, real estate data firm CoreLogic revealed that there had been 3.4 million foreclosures since 2008. That would mean only about 6 percent of homes in America had been through a foreclosure - and this, through the very worst recession of most of our lives.

The more probable risk is the risk of ending up underwater, which more than 25 percent of American homes were at some point during this past 5 years.

The fact that home values rise and fall cyclically is not a risk or a probability - it’s a fact of the real estate market, and one that you can’t do anything about. Your aim should be to manage and minimize the risk of serious mortgage distress (i.e., struggling to make the payment) or foreclosure. And you have the power to manage these risks by:

• Making smart mortgage choices. Buying at a price well within what you can afford, selecting a mortgage that your household finances can sustain over time, and not overleveraging by borrowing cash against your home equity for things like cars, clothes or ready cash.
• Making smart financial moves over time, including building a cash savings cushion you can turn to if a job loss or disability interrupts your income.
• Buying a home in as desirable a location as you can afford - and in an area with strong prospects for economic and population growth.
• Making small, extra payments to bring down the principal balance on your loan, if and when you can afford to.

Risk #2: The Risk of Overextending Yourself. This is a very real risk - more real, even than the risk of actually losing a home. Home buyers can overextend themselves when they take loans that give them falsely low upfront payments;. This was common in the subprime era that many believe led to the recession, but is less likely with today’s tighter lending guidelines and narrow loan programs...
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